Question

What argument explains lobbying for or against free trade?

A. The number of people who lose from free trade is larger than the number of people who gain. The gain per person is large, so these people have an incentive to create a lobby group with a strong political voice.
B. The loss from free trade will be so great that losers will find it profitable to join a political organization to prevent free trade.
C. The gain from a tariff is so small that producers have little incentive to incur the expense of lobbying for restricted trade,
D. The anti-free-trade group will undertake less political lobbying than will the pro-free-trade group.

Answer 1

Arguments for or against free trade involve potential gains for a smaller interest group versus distributed losses among consumers, affecting the likelihood and intensity of lobbying efforts.

Step-by-step explanation:

Lobbying for or against free trade can be influenced by various arguments. One such argument suggests that the number of people who benefit from free trade is smaller than those who are adversely affected, yet the gains per individual within this smaller group can be substantial. This creates a powerful incentive to form lobby groups with significant political influence.

On the other hand, those who suffer losses might find it more advantageous to organize politically to oppose free trade, aiming to introduce tariffs and other trade barriers. However, for producers, the potential gains from tariffs are often minimal, reducing the incentive to incur lobbying costs for restricted trade. It is also proposed that anti-free-trade groups may engage less in political lobbying than pro-free-trade groups, possibly because free trade typically has broader, yet less concentrated, benefits which make it harder to organize a unified opposition.